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A, B and C share profits in the ratio 2:5:3. A retires, and B and C acquire A’s share in the ratio 3:2, respectively. What will be the new profit-sharing ratio of B and C?

Answer and explanation

Correct answer: 31:19

A’s share is \(2/10\). B and C acquire it in the ratio 3:2, so B receives \((3/5)\times(2/10)=3/25\) and C receives \((2/5)\times(2/10)=2/25\). Therefore, B’s new share is \(5/10+3/25=31/50\), while C’s new share is \(3/10+2/25=19/50\). Hence, the new ratio is 31:19. Option 8:5 is only B and C’s old ratio and does not account for the transfer of A’s share. Exam tip: First calculate the retiring partner’s share, then distribute it according to the stated acquisition ratio.

Related tags

Retirement Of PartnerNew Profit Sharing RatioGaining RatioPartnership AccountingClass 12 AccountancyNew RatiosReconstitution Retirement Or Death Of A PartnerAccountancy

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